III. RESULTADOS
III.7 Efecto de la biodesinfección en el ensayo 7
To better fulfil its role in the GFSN in the wake of the global financial crisis, the IMF in March 2009 overhauled its lending framework. One of the most remarkable innovations was the introduction of the Flexible Credit Line (FCL), the IMF’s first genuine precautionary lending instrument that allocates large amounts of resources to countries with strong fundamentals and solid policy track records. Other than with instruments the IMF created in the past, countries that decide to apply and, eventually, are deemed to qualify for the FCL can draw on it at their own discretion (should a financing need emerge) and without having to agree to an adjustment programme or other ex post conditionality.
This paper has provided an empirical evaluation of the FCL’s selectivity and effective- ness. First, starting from the observation that to date only Mexico, Colombia and Poland have subscribed to FCL arrangements, we have attempted to identify which factors explain these three countries’ participation. Our probit analysis has shown that both demand- and supply-side variables mattered, although one should be careful in making causal claims. On the side of the prospective applicants, we have found that exchange market pressure in the run-up to the FCL’s creation is correlated positively with the probability of entry into an FCL arrangement. Ceteris paribus, such pressures increase countries’ demand for foreign exchange, from the IMF or other sources. On the other hand, also initially lower bond spreads, lower inflation, a higher share in US exports and a higher propensity of making po- litical concessions to the US (the IMF’s largest shareholder) were associated with a greater likelihood of obtaining an FCL arrangement. The influence of bond spreads and inflation corresponds with the official qualification criteria against which IMF staff is supposed to assess the eligibility of FCL applicants. The US exports share and political concessions vari- ables too fit supply-side arguments touted by a large empirical literature on IMF lending, i.e., that the US exerts (explicit or implicit) influence on IMF lending decisions to protect its (exporters’) economic interests and rewards foreign policy allies with favourable Executive Board votes. That said, the political concessions variable may be demand-related as well. Possibly, countries that are more friendly towards US foreign policy feel less stigma and are overall more comfortable in approaching the IMF (widely regarded as a US/G7-dominated institution) for an FCL.
Second, we have evaluated the extent to which the FCL arrangements of Mexico, Colombia and Poland have delivered on their promise of boosting market confidence in their respective users. More specifically, we have employed the synthetic control method, a coun- terfactual approach, to assess the longer-term effects of the FCL on the three countries’ EMBI spreads and gross capital inflows. The outcomes of our counterfactual exercises have pointed to some but generally not spectacular beneficial effects, which in the case of spreads became visible only a considerable time after the respective FCLs were first approved. These lags may be the result of the FCL’s effectiveness depending on the changing external envi- ronment and/or reflect the influence of other, idiosyncratic factors (such as post-FCL policy changes) which we do not capture.
Possible avenues for further research include using a similar approach to estimate the effects of the FCL on other variables, such as exchange rates, international reserves, do- mestic/corporate bond spreads, or subcomponents of overall capital inflows. One could also apply the same methodology to evaluate the impact of the PCL/PLL. Finally, it would be
interesting to study the behaviour of bond spreads, capital flows and other indicators of market confidence once Mexico, Colombia and/or Poland decide to exit their current FCL arrangements.
At this point, we believe there are two main policy implications one can draw from our analysis. First of all, as we do not find evidence of negative market reactions to countries accessing the FCL, at least not in terms of EMBI spreads or capital inflows, any economic stigma that prevents eligible countries from applying for an FCL arrangement seems unwar- ranted. The IMF may want to stress this more in its communication about the FCL. Second, however, the apparent link of FCL participation with US economic and political interests seems not conducive to overcoming political stigma. Even if, in reality, Mexico, Colombia and Poland’s entry into FCL arrangements had more to do with these ‘US-oriented’ coun- tries feeling less inhibited in approaching the IMF than with US favouritism, it may not be perceived as such by other member countries. If the IMF wants to increase its clout in the GFSN by widening the appeal of and actual participation in precautionary lending instruments such as the FCL, it will have to engage in more and better-targeted outreach activities. For example, IMF staff could engage in in-depth discussions with country au- thorities on what exactly holds them back to seek precautionary IMF support, even if no ex post conditionality applies to that support. Perhaps a good place to start such discussions would be member countries that are less obviously aligned with the US in terms of economic relations and foreign policy.
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Appendix Tables and Figures
Table A1: EMBI Global sample countries for FCL selectivity analysis
Country ISO-3 code Baseline multi-regressor probit Ongoing IMF arrangement (other than FCL)
as of 23 March 2009? FCL Mexico MEX X No Poland POL X No Colombia COL X No Non-FCL Argentina ARG No Belize BLZ No Brazil BRA X No Bulgaria BGR X No Chile CHL X No China CHN No
Dominican Republic DOM X No
Ecuador ECU No
Egypt EGY X No
El Salvador SLV X Yes, SBA approved on 15 January 2009
Gabon GAB X Yes, SBA approved on 7 May 2007
Georgia GEO Yes, SBA approved on 15 September 2008
Ghana GHA X No
Hungary HUN X Yes, SBA approved on 6 November 2008